Dive Brief:
- Total construction starts ticked up 1% in January to a seasonally adjusted annual rate of $1.16 trillion, according to Dodge Construction Network.
- Even with December’s big bounce where starts rebounded 20% off of a 10-month low in November, the marginal uptick in January means construction activity is still just barely treading water over the past year and is about 1% lower than in January 2023.
- “Construction starts are struggling to make headway in the new year,” said Richard Branch, chief economist for Dodge Construction Network. “Construction starts will continue to struggle early on in 2024 as higher interest rates and tight credit standards are slowing down projects moving through the planning cycle to start.”
Dive Insight:
Despite this year’s initial sluggishness, Branch said expected interest rate cuts in the second half of 2024 should push some of these projects in the planning queue through to break ground, leading to a rising trend in construction activity as the year progresses.
But until those cuts provide some relief, construction activity could remain somewhat hamstrung. The American Institute of Architects’ Architecture Billings Index, which tracks architectural design activity and leads actual construction by nine to 12 months, signaled continued softness as business conditions remained on a decline, said Kermit Baker, AIA chief economist.
“This now marks the lengthiest period of declining billings since 2010,” said Baker. “Although it is reassuring that the pace of this decline is less rapid and the broader economy showed improvement in January.”
Manufacturing boom leads the charge
After a 75% increase to close the year in 2023, manufacturing starts posted another 26% jump in January, according to Dodge.
Despite the increased activity, however, nonresidential building starts as a whole lost 2% in January to a seasonally adjusted annual rate of $483 billion.
That drop largely stems from a 14% decrease in commercial starts, which include retail, office and warehouse projects. Institutional starts, which consist of healthcare and education projects, also lost 1%, according to Dodge.
For the 12 months ending January 2024, nonresidential building starts dropped 5%. Manufacturing starts decreased 20% and commercial starts tumbled 10%, while institutional starts remained 9% higher.
The largest nonresidential building projects to break ground in December included:
- $5.5 billion Texas Instruments fabrication plant in Lehi, Utah.
- $2.6 billion Terminal B construction at George Bush Houston Airport in Houston.
- $1 billion BlueOval battery plant in Marshall, Michigan.
Nonbuilding starts continue resurgence
Nonbuilding starts, which include highway, street, bridge, gas plants and environmental public works, continued to grow in January, jumping 9% to a seasonally adjusted annual rate of $280 billion.
Environmental public works rose 38%, while highway and bridge construction improved 9%, according to the report, but utility and gas plant activity plummeted 35% in January.
For the 12 months ending January 2024 total nonbuilding starts jumped 17%. Highway and bridge starts increased 11%, environmental public works gained 10% and utility and gas plant starts improved 36%, according to the report.
The largest nonbuilding projects to break ground in January included:
- The $610 million Nelson Wastewater Treatment facility in Mission, Kansas.
- The $517 million wastewater treatment plant in Ewa Beach, Hawaii.
- The $473 million I-10 bridge in Pensacola, Florida.
Multifamily starts improve to start 2024
Residential starts as a whole, including single family and multifamily, remained relatively flat from December to January at a seasonally adjusted annual rate of $393 billion.
But multifamily starts increased 6% in January, while single family starts decreased 3%, according to the report. For the 12 months ending January 2024, single family starts remained 8% lower, while multifamily starts also dropped 7%.
The largest multifamily buildings to break ground in January included:
- The $1.5 billion One Beverly Hills tower in Beverly Hills, California.
- The $447 million Olara Condominium tower in West Palm Beach, Florida.
- The $330 million The Exchange at Spring Hill Station in Tysons, Virginia.
